2012 GET BACK IN THE BLACK!Just because our governments can not figure a way to get out of the deep hole of debt, it does not mean personally you can not start digging yourself out during 2012. You have to like your money and being debt free more than your toys!
A little advice from Men's Health:
Strategy 1. Slash Your Expenses
Aim to cut 10 to 15 percent from your monthly expenses. Yes, you can eat more at home, buy a cheaper wine, and clip coupons. But you can also start making phone calls. You'll be surprised at how much you can save by simply asking. Cellphone: The average cellphone owner uses about 422 minutes a month, according to J.D. Power. Yet cell providers often tout 600- and even 900-minute plans as their "most popular." Reducing your allowable minutes from 600 to 450 would save you that magic 10 percent. And if you use less than 400 minutes a month, prepaid plans are always a better deal. Cable or satellite TV: Look for a special introductory offer from a competitor and ask your current provider to beat it. Many companies will ante up a "customer loyalty" discount—ranging from 10 to 25 percent—that's typically good for a year. Utility bill: Older water heaters eat up to 25 percent of the energy you use. Put a $10 water-heater blanket around it and you'll reduce your bill by your target 10 percent. Auto insurance: Raising your deductible from $500 to $1,000 will save you up to 40 percent. And be sure to mention that you're shopping around; you may find that you're suddenly "eligible" for a reduced rate.
Strategy 2. Wipe Out Your Credit Card Balance
Take the money you save from strategy 1 and apply it to your monthly debt payment. Say you owe $5,000 at 21 percent interest. Paying $100 a month, it'll take almost 10 years to satisfy the debt. Pay $110 a month, though, and you'll finish 2 1/2 years earlier.
And make sure to heed his advice as well:
+Don't schedule automatic payments around due dates: Credit-card companies shift those around, hoping to sock you with a late fee and raise your rate. Another reason to be early is a creepy practice called universal default. "Many companies have a system set up so when you're late on one card, other cards raise their rates, too," says Carmen Wong Ulrich, author of Generation Debt.
+Pay off your highest-interest balances first, and consolidate debt as efficiently as possible through balance transfers. (Look for a permanent rate and no annual fees; visit www.creditcardspecialist.com to find the best deals.) "If your interest rate drops from 20 percent to 10 percent, that's an immediate return," says Nicholas Nicolette, a certified financial planner and the president of the Financial Planning Association.
+Hit the ATM. Starting forcing yourself to keep more hard cash on-hand—studies have shown that people spend 30 percent less when paying with paper, not plastic.
+Don't schedule automatic payments around due dates: Credit-card companies shift those around, hoping to sock you with a late fee and raise your rate. Another reason to be early is a creepy practice called universal default. "Many companies have a system set up so when you're late on one card, other cards raise their rates, too," says Carmen Wong Ulrich, author of Generation Debt.
+Pay off your highest-interest balances first, and consolidate debt as efficiently as possible through balance transfers. (Look for a permanent rate and no annual fees; visit www.creditcardspecialist.com to find the best deals.) "If your interest rate drops from 20 percent to 10 percent, that's an immediate return," says Nicholas Nicolette, a certified financial planner and the president of the Financial Planning Association.
+Hit the ATM. Starting forcing yourself to keep more hard cash on-hand—studies have shown that people spend 30 percent less when paying with paper, not plastic.
Strategy 3. Budget for the Inevitable
It's happened to everyone: You're sticking to a smart budget, and then bam—your tire blows out or your dishwasher breaks. Suddenly, you're in the red. "We need to move past this idea that these are 'unexpected' bills," says Shannon Plate, author of Degunking Your Personal Finances. "Cars break. Houses break. People break. It has to be part of your budget."
Plate suggests socking away $50 a month for car repairs and another $100 a month for house repairs, assuming you own one. Likewise, set a realistic monthly entertainment budget—for everything from beers after work to poker night with buds—and be a slave to it. Then, at the end of the month, sweep what you didn't spend from all of the above into your emergency fund; financial planners recommend having enough liquid assets to survive 3 to 6 months of unemployment.
A great place to park your rainy-day fund is a high-yield money market. (Visit bankrate.com to find the best rates.) CDs aren't a good idea, because emergency funds need to be available quickly. And resist the urge to dump this money into stocks. "You don't want to expose this money to risk," says Nicolette. "The same conditions that can lead to layoffs also drive down the market."
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